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9. Asset Retirement Obligation
3 Months Ended
Sep. 30, 2014
Accounting Policies [Abstract]  
Asset Retirement Obligation

The Company has recognized estimated asset retirement obligations (closure cost) of $423,700 to remove leasehold improvements, remediate any pollution issues and return the Deer Creek water disposal property to its natural state at the conclusion of the Company’s lease. The closure process is a requirement of both the Deer Creek lease and the State of Colorado, a permitting authority for such facilities. The closure cost estimate, in current dollars, was completed by an approved independent consultant experienced in estimating closure costs for water disposal operations and the estimated amount was approved by the State of Colorado. A present value discount has not been taken as the estimated closure costs, excluding regulatory changes and inflation adjustments, are anticipated to remain fairly consistent over the operational life of the facility.

 

The Company reviews the asset retirement obligation quarterly and performs a formal annual assessment of its estimates to determine if an adjustment to the value of the asset retirement obligation is required.

 

The laws of the State of Colorado require companies to meet environmental and asset retirement obligations by selecting an approved payment method. The Company has elected to meet its obligation by making quarterly payments of approximately $4,700 into a trust that, over the expected lease period, will build liquid assets to meet the asset retirement obligation. During the three months ended September 30, 2014, the Company made the required quarterly payments. The balances in the trust account for the asset retirement obligation as of September 30, 2014 and June 30, 2014 were $53,400 and $48,700, respectively.